FarmLead’s Review of 2018 Barley Prices, Market

As we turn the calendar on 2018 barley prices and market, it’s a time of reflection, but also one of planning. That being said, as a company, FarmLead is also reflecting on 2018 and planning for 2019 with some new products and tools! We’d love for you to have some input in the evolution of FarmLead (including some early access to try out some new tools) and so, before continuing your reading, please answer this 4-question survey. Thanks!

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FarmLead’s 2018 Barley Prices, Market Recap

Barley prices in 2018 saw the usual teeter-totter, especially with feed barley prices, but the surprise was the strength of the global trade, namely feed demand. While barley prices haven’t been nearly as volatile as soybeans, their performance has been surprisingly decent. Let’s dig into why though.  

Barley Prices Helped by Understated Production

Barley production in 2018 around the world was expected to come in smaller this year but the USDA recently increased total output in their December WASDE. This was a continuation of the increase in barley supply from the November WASDE by the USDA.

2018 Barley Production - Top 5 Countries

All things considered, Black Sea barley production continues to be strong, despite the Russian barley harvest falling back to earth in 2018/19 after last year’s monster crop. Also, thanks to a drier growing season, the 2018/19 EU barley harvest was also smaller, coming in at roughly 57 MMT according to the USDA (all other estimates are within about 1 MMT of the USDA’s estimate).

2018 Global barley yields

Worth noting, however, was the decline in quality malt barley coming out of the European Union. It’s been suggested that the EU’s malt barley needs might short by about 500,000 MT.

The 2018 U.S. barley harvest also improved slightly in 2018 to 3.33 MMT (or about 153 million bushels if converting metric tonnes to bushels), but this is still down 20% from the 5-year average. This is mainly attributed to yields improving so significantly, relative to less acres being planted.

2018 U.S. Barley Production vs Yields

Australian Barley Prices Sizzle on Smaller Harvest

We didn’t mention Australia in the list above specifically because they saw one of the most troubling years of barley production in recent memory.

Back in early December, we got the most recent estimates from Australia, which showed a crop well-below first expectations back in June. Specific to barley, ABARES (the Australian USDA equivalent) pegged the 2018/19 harvest at just 7.3 MMT. This was down 1 MMT from their September estimate and nearly 2 MMT below the original estimate back in June.

Dec 2018 ABARES Australian Barley Harvest

This is one of the smallest barley crops in Australia’s recent memory, down about 18% year-over-year and more than 25% below the 5-year average (albeit that includes the record barley harvest in 2016/17 of 13.4 MMT). With this sort of relatively miniscule production (especially to years past), it’s clear that Australia just might not be able to export as much barley as it has historically, especially malt barley.

Australian barley exports account for about two-thirds of all Chinese barley imports, or about 4 MMT of China’s total barley imports of 6.5 MMT. However, this 4.5 MMT is based on average Australian barley production. Considering this year’s barley harvest in the Land Down Undaa will be 2 – 2.5 MMT below the average, can they export the same amount to China? Likely not!

Currently, the USDA is forecasting Australian total barley exports at 5.7 MMT, but ABARES thinks it’ll be closer to 5 MMT. This is, in part, due to the fact that Western Australian barley buyers/exporters are making more money shipping it over to the eastern side of the country, where barley prices are at record levels, instead of to China and other southeast Asian markets.

For example, in Western Australia where there’s a decent crop, feed barley prices there are trading at around $215 USD / MT (or $4.75 USD and $6.50 CAD per bushel). Malt barley prices trading in Western Australia are slightly higher at $225 USD / MT (or about $4.90 USD and $6.70 CAD per bushel). For perspective though, these values are down about $20 USD / MT from the highs of the market seen right before the start of the Aussie barley harvest.

Something that those pricing in Aussie barley exports is the recent anti-subsidy probe that China has started. [1] As such, we might see some musical chairs on the chart below of who has more or less exports.

2018 Barley Exports - Top 5 Countries

Canadian Barley Prices Helped by Exports (Again)

Canada is likely the best-positioned to take advantage of this Australian-China gap, picking up from where they left off last year with a record amount of 2.87 MMT shipped out. In fact, through Week 20 of the 2018/19 Canadian barley crop year, Canadian barley exports are sitting at a total of 914,400 MT, up more than 26% year-over-year.

2018-2019 Week 20 Canadian Barley Exports (Cumulative)

2018-2019 Week 20 Canadian Barley Exports (Weekly)

Something to keep in mind is that Agriculture Canada is currently expecting 2018/19 Canadian barley exports to fall 13% year-over-year. On that note though, farmer deliveries year-to-date are also ahead of last year, up 21.5% to 1.45 MMT.

The main reason behind this is that the 2018 Canadian barley crop has come in slightly higher than first expected. The most recent StatsCan estimate pegs the 2018 barley harvest at 8.4 MMT. This is mainly because of more acres planted, albeit a smaller yield.

AAFC Estimates of Canadian Barley Market (Production & Exports)

However, thanks to the harvest being a bit late, there’s likely going to be more feed barley available this year in Canada than in the past. Further, the summer heat negatively impacted malt barley quality, namely lower bushel weights and higher protein

Barley Prices Remain Strong on Low Supply

Despite a bigger crop in North America, the fact remains that domestic and global demand for barley remains robust. In turn, that continues to support elevated prices. Despite the increase in production, AAFC notes that feed barley prices are tracking about 20% better than last year.

2018 Western Canada Feed Barley Prices

Similarly, malt barley prices are tracking about 15% higher year-over-year. This could, in turn, buy a few acres in 2019 but we’ll discuss that in our 2019 Barley Markets outlook next week. Also, for discussion next week is the transition of malt barley buyers around the world, notably Cargill selling its assets. [2] This is certainly changing acres in the likes of North Dakota. [3]

Coming back to barley prices though, the higher values are mainly due to the fact that there is a smaller amount of barley in both Canada and the rest of the world. Specific to the Great White North, strong domestic and export demand (as mentioned) could likely push Canadian barley ending stocks below 1 MMT for the first time ever

AAFC Estimates of Canadian Barley Prices & Ending Stocks

Thinking more globally, the USDA is currently forecasting 2018/19 worldwide barley carryout to come in at 17.4 MMT, down about 26% year-over-year. On that note, average global feed barley prices continue to trade about $75 USD / MT (or $1.63 USD and $2.23 CAD / bushel) higher than corn prices. With some lower quality feed grains available in North America this year, and their expensive nature compared to corn or DDGs, this intuitively starts the substitution discussion, which we’ll continue in our 2019 Barley Markets Outlook.  

Overall, barley prices have stayed resilient, and that has helped us be strong sellers of both old and new crop before we turn the calendar into 2019. However, stronger barley prices likely mean more growers around the world will plant more barley in 2019. This includes the likes of the U.S., the E.U., Canada, Australia, and even Russia, as barley demand out of the Black Sea has also been strong in 2018 and looks like that will carryover into the 2019 calendar year.

To growth,

Brennan Turner
CEO
—-
FarmLead – North America’s Grain Marketplace

About the Author
Brennan Turner

Brennan Turner is the CEO of FarmLead.com, North America’s Grain Marketplace. He holds a degree in economics from Yale University and spent time on Wall Street in commodity trade and analysis before starting FarmLead. In 2017, Brennan was named to Fast Company’s List of Most Creative People in Business and, in 2018, a Henry Crown Fellow. He is originally from Foam Lake, Saskatchewan where his family started farming the land nearly 100 years ago (and still do to this day!). Brennan's unique grain markets analysis can be found in everything from small-town print newspapers to large media outlets such as Bloomberg and Reuters.

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